Fysikum

Problem Definition

Your client, Fysikum, is an operator of squash centres in Sweden. The squash centres include sauna, spa, pool, gym and of course the squash courts. Due to the extreme success in Sweden the company is considering expanding to other countries of Europe, in particular Germany.

Therefore they asked us to evaluate this possible expansion.

Comments

This case is made to be interviewer-led. Therefore the interviewer should guide the interviewee through the interview.

The case is split into two parts.

The first part describes more qualitative problems and has more open questions that should make the interviewee think about the problem and its solution.

The second part is more about quantitative problems and calculations. Here the interviewee should try to make his own calculations and solve the questions.

The questions in the big boxes should be read out and shared with the candidate.

Short Solution

In order to be profitable the membership fee should be higher than €90 per year.
There is a competitor that offers a membership for €50 per year.
Therefore it needs to be further investigated if Fysikum can differentiate its services enough to make the higher fee attractive.

Detailed Solution

Paragraphs highlighted in green indicate diagrams or tables that can be shared in the “Information to share” section.

Paragraphs highlighted in blue can be verbally communicated to the interviewee.

Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.

The following framework/structure provides an overview of the case:

Case Structure

I. Background

First we will start with the more qualitative part of the case.

1. What kind of information would you need in order to estimate the outcomes of this expansion?

This question should give an overview of the candidate’s ability to structure an answer. The best way to solve this is by using a “3C’s” or “Porter’s Five Forces” analysis.

The interviewee should give the candidate a short period of time for brainstorming.

The answer should include some of the following points:

2. How would you gather the needed information you just mentioned?

Good answers

Purchase marketing analyses / research reports
Internet research on competitors
Contact real estate agent for real estate costs

Outstanding answer

Contacting someone in the consulting company who has experience in the market or industry

This should be emphasized, as this point will make the candidate come across as “somebody from the team” and will make it easier for the interviewer to consider working with the interviewee.

II. Cost

Now we can start with the more quantitative part of the case.

3. Can you determine the minimum annual membership fee Fysikum has to charge in order to cover the running cost?

Share Table 1 if the interviewee inquires information about the costs.

Information that can be shared if inquired:

If the candidate asks about the revenues, tell him/her that they are equal to the annual costs.
Courts are always used during operating hours.
The candidate should think about the possibility of doubles. If he asks he should assume 50% single and 50% double matches.

The calculation should look like the following:

# of players per court & hour (average)

Hours played per week & court

# of members per court & week

Total # of members

Cost per member and year

4. Are you sure that this is an annual membership fee and not a weekly charge?

This is meant to be a tricky question to show the confidence of the interviewee. But as the annual costs are divided by the total number of members this is indeed an annual fee.

The interviewee should not lose confidence in the previous answer.

III. Competitors

5. The dominant market player for squash centres (60% market share in Germany) offers memberships for €50. Would you recommend entering the market?

Good answer

Further investigation is required, in particular what the competitor is offering and if Fysikum can differentiate its services from this offering.

For instance if the competitor is using a cost leadership strategy and offers a very cheap, but low quality service, Fysikum could launch a premium, high quality squash centre.

Outstanding answer

There could be other outcomes of the investigation.

If the competitor operates across all segments, from low-end to high quality, and has a lower cost base, Fysikum should not enter the market. An entrance would only lead to a price competition that our client cannot win.

IV. Conclusion

6. If you have to report to the CEO right now, what would you tell him/her?

Conclusion

In order to make no loss, Fysikum would need to charge more than €90 per member.
The client should only enter the market if there is a possibility to differentiate from the dominant competitor.
Other issues, mentioned at question 1 should also be considered.

Difficult Questions

What other possibilities are there to differentiate the offered service compared to the competitor?

There are several possible solutions (some mentioned at the beginning of the case):

Providing high-quality courses
Setting up cross-country tournaments between Sweden and Germany
Advertise the squash centre with famous people (celebrities)
Offer longer opening-hours for members paying a higher fee
Offer services like a café or a bar

More questions to be added by you, interviewer!

At the end of the case, you will have the opportunity to suggest challenging questions about this case (to be asked for instance if the next interviewees solve the case very fast).

Problem Definition

Comments

Short Solution